Industrial output fell 1.2% in Feb on poor show in capital goods

Factory output, measured by the IIP, had expanded by a revised 3.3 per cent in January

Industrial output had contracted 1.2 per cent in February from a year earlier, driven down by a contraction in capital goods production, government data showed on Wednesday.

Factory output, measured by the Index of Industrial Production (IIP), had expanded by a revised 3.3 per cent in January. This was mainly due to a bounce-back in the consumer and capital goods  sectors. Industrial output had contracted 0.1 per cent in December, on account of the cash crunch after demonetisation of high value currency notes.

Manufacturing, three-fourth of the index, fell by two per cent in February, as compared to a 2.3 per cent rise in January.

In all, nine of the 22 industry groups in the manufacturing  sector showed positive growth during February on an annual basis. Of these, the industry group 'electrical machinery and apparatus'’ and basic metals continued to be among the highest growing. Sugar, cements and plastic machinery showed high declines.

“This clearly shows the fragile nature of industrial/manufacturing growth, languishing for years. No doubt the overall macro economic environment is conducive for growth but there are cyclical/structural factors at both the global and domestic level. This is making industrial/manufacturing recovery a long-drawn process, leaving one to wonder when we will reach the end of the tunnel,” said Sunil Kumar Sinha, principal economist at India Ratings & Research.

Electricity generation was up a marginal 0.3 per cent, as against a 3.9 per cent rise in January. Mining also maintained a growth trend, going up by five per cent in February, as compared to a 5.3 per cent rise the previous month.

Similar to the main index, capital goods fell by 3.4 per cent. The segment had shown 10.7 per cent growth in January, after a three per cent fall in December. The sector is a volatile part of the IIP.

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Consumer goods contracted by 5.6 per cent. This is owing to both durable and non-durable items, contracting by 0.9 and 8.6 per cent, respectively.

Cumulative growth of the country's factory output for the April-February of  2016-17 (first 11 months of that financial year) was 0.4 per cent, much lower than that of 2.6 per cent during the corresponding period of 2015-16.

Industrial production for March is expected to have done well. “Available indicators for March paint an improved picture, with resumption of growth in automobile production, as well as improved growth of coal output, electricity generation, cargo handled at major ports and consumption of some fuels,” said Aditi Nayar, principal economist at ratings agency ICRA.